Upvoting the parent. The comment is worthwhile and merits discussion. Should not have been downvoted.
The comment that this is a way of reducing investor risk and may yield a higher valuation is well-taken. But founders should not agree to it, because their risk is far, far, far higher than that of the investors.
A founder gets one shot, or maybe two or three shots, in their lifetime. An investor gets many shots across a diversified portfolio. A founder puts their career and their financial future across in this one basket. They put their sanity and their personal happiness in this basket. An investor puts nothing but a small portion of their, or more frequently other people's, wealth in this basket.
Making it less likely that a founder will get a payoff is just stupid. A founder should do everything they can to reduce their risk, even at the cost of a lower valuation.
The comment that this is a way of reducing investor risk and may yield a higher valuation is well-taken. But founders should not agree to it, because their risk is far, far, far higher than that of the investors.
A founder gets one shot, or maybe two or three shots, in their lifetime. An investor gets many shots across a diversified portfolio. A founder puts their career and their financial future across in this one basket. They put their sanity and their personal happiness in this basket. An investor puts nothing but a small portion of their, or more frequently other people's, wealth in this basket.
Making it less likely that a founder will get a payoff is just stupid. A founder should do everything they can to reduce their risk, even at the cost of a lower valuation.